On September 11, Nevada and Tesla Motors entered into a multi-billion dollar agreement that has potentially significant economic implications for the state as well as manufacturing industries in general. During a special two-day session, the state Assembly and Senate unanimously approved S.B. 1, which was subsequently signed by Nevada Gov. Brian Sandoval (R), allowing the electric car producer to build a $1.3 billion “Gigafactory” just outside Reno.
The 5 million square foot lithium battery production facility will be one of the largest buildings in the world. At the September 4 Economic Development Announcement, Tesla Chairman and CEO Elon Musk remarked on the Gigafactory’s sheer size. “It’s not just going to be the largest lithium ion battery factory in the world, but it will actually be bigger than the sum of all [other] lithium ion factories in the world,” said Musk. “It’s a heck of a big factory.”
Tesla is required to invest at least $3.5 billion in Nevada within the deal’s 10-year period. Steve Hill, Director of the Nevada Governor’s Office of Economic Development, expressed excitement over the project’s economic impact, not only for northwest Nevada but the entire state. “More than 3 percent of the entire state’s economic output and more than 20 percent of the region’s economic output as a result of this one project,” said Hill. “Obviously, you can see this for being transformative.”
However, Nevada is not the only one benefitting from this arrangement. Over the next 10 years, Tesla will receive massive state tax incentives, including $725 million in sales tax abatements, $322 million in property tax abatements, and $27 million in payroll tax abatements.
Additionally, Tesla is eligible for up to $195 million in transferable tax credits; $75 million for their 6,000 Gigafactory employees, $50 million for initial in-state capital investments, and $70 million in secondary in-state capital investments. Other Nevada companies will be able to buy Tesla’s credits in order to reduce their own tax liabilities.
The same day he signed the agreement, Gov. Sandoval signed three other bills that stand to benefit Tesla:
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What are the economic impacts of such large-scale state tax abatements?
For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library.
By Mark J. Kennedy
Follow us on Twitter: @BBNAtax
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